For each question, sщpose that the exonorm begins at the long-run equilibrium point $A$in the diagram below. Identify which of the other points on the diagram-points $B,C,D$, or $E$-could represent a new long-run equilibrium after the described events take place and move the economy away from point $A$.

a. Significant productivity improvements occur, and the quantity of money in circulation increases.

b. No new capital investment takes place, and a fraction of the existing capital stock depreciates and becomes unusable. At the same time, the government imposes a large tax increase on the nation's households.

c. More efficient techniques for producing goods and services are adopted throughout the economy at the same time that the government reduces its spending on goods and services.

Aggregate demand givesthe assorted quantities of all final goods and services which are demanded at various corresponding price levels, keeping all other things constant. Aggregate supply showsthe varied quantities of all goods and services which the firms areable to trade at a specifiedfundamental measure.

Equilibrium occurs at some extent where the demand and provide curves intersect. Similarly, equilibrium index occurs at some extent where the mixture demand curve crosses the future Aggregate supply curves (LRAS) as shown within the diagram below:

Initially, the economy is at point $A$where short run aggregate supply ${\mathrm{SRAS}}_1$ and aggregate demand curve ${\mathrm{AD}}_1$ intersect.

a. In this event, productivity improvements occurred and quantity of cash in circulation increases. because of the occurrence of productivity improvements, there'll be a rise within the supply and production and also the aggregate supply increases from ${\text{LRAS}}_1$to${\text{LRAS}}_2$ .
Due to increase in money circulation, people will have more money in hand that the aggregate demand increases from ${\mathrm{AD}}_1$to ${\mathrm{AD}}_2$. Hence, the economy will move from point $A$to point $B$where ${\mathrm{LRAS}}_2$ keeping indicator to be same at$120$

c. More efficient techniques for producing goods and services are adopted throughout the economy which can shift the combination supply to the correct from LRAS, to LRAS 2 and at the identical time government reduces its spending on goods and services which is able to reduce the combination demand from ${\text{LRAS}}_1$to ${\text{LRAS}}_2$ and hence the equilibrium will shit from ${\text{AD}}_1$to${\text{AD}}_3$